For professional investors only
A recent survey carried out by IFA Magazine in partnership with Invesco, has highlighted that whilst advisers are thinking favourably when it comes to investing sustainably, there are still challenges to overcome
Sustainability and performance
Survey respondents were certainly thinking positively in this regard, with 54% believing that sustainable investing is more likely to improve investment performance, compared to just 14% who see it as a performance drag. The 32% who believed that it has no overall impact are clearly to be persuaded of the benefits or otherwise, when it comes to their clients’ portfolios.
Forthcoming regulatory change which is expected as the FCA looks to develop consistent and trusted standards around sustainable investing, are also viewed positively. 39.7% of respondents believe that this will lead to changes in the way their firm operates, as opposed to 27% who believe that it won’t. However, with one in three respondents (33.3%) confessing that they don’t know if such changes will or won’t affect them, there is clearly a need for greater information and clarity around these standards.
When asked to identify the range of different ESG investment categories which were already reflected in their clients’ portfolios, ‘broad ESG integration’ was one of the clear winners with 65.9% of respondents having including it within their portfolios. ‘SRI’ (socially responsible investing) came a close second with 57.9% of respondents having also used these funds. These two categories were well ahead of other areas such as climate focussed (28.6%) or impact investing (27.8%).
Not everyone likes a challenge
Despite being positively inclined towards sustainable investments, advisers face many challenges in stock or fund selection as well as in getting good data. When asked to identify what they see as the biggest barriers to sustainable investing, survey respondents were thinking in alignment as the ‘lack of consistency in definitions’ (64%) and ‘greenwashing’ (62%) dominated. Other challenges identified by around a third of respondents were that ‘fund research tools don’t have the right filters or information’ (39%) or that there are ‘not enough good options in some sectors/asset classes’ (32%).
Are ETFs a viable solution?
As well as a fund’s sustainability credentials, the most suitable investment structure is also a consideration for advisers. Whilst our survey respondents were largely unsure as to whether or not exchange traded funds (ETFs) can achieve real ESG change (60.3% said ‘don’t know’), ETFs are clearly playing a part in the portfolios of advisers’ clients – and seem likely to become increasingly so over the next few years if our survey results are anything to go by. 28.6% of respondents told us that they either already have ESG ETFs in their clients’ portfolios or are considering them, although 71.4% do not. Interestingly, when asked about their intentions however, 44.4% of respondents said that they plan to increase their client portfolios’ ESG ETF allocation in the next twelve months therefore it appears that advisers are seeing value in this structure to deliver the all important benefits they seek.
When it comes to working out the quantum of the change in use of ETFs for ESG investing, our survey found 0% of respondents had decreased their ESG ETF exposure over the past two years, 55.6% had slighted increased it, 27.8% had increased it and 5.6% have significantly increased their exposure – with the remainder being not sure. This indicates that advisers are finding real value in the ESG ETF space and are looking to exploit it further in years to come.
In summary, we believe that these data show that while there is a need for greater clarity and transparency when it comes to the growing momentum towards investing sustainably, advisers are increasingly seeing the potential in the use of ETFs to deliver effective solutions for their clients in the ESG space.
And one last word, and that’s to say thanks to all the IFA Magazine readers who took the time to respond to the survey and to share their views with us. Your feedback and insight is always much appreciated.
If you’re interested in broad ESG improvements or have more specific targets, find out how you can use Invesco’s range of ESG ETFs to meet your core investment objectives as well as gain exposure to more specialist areas.
The ESG Sentiment Survey was carried out by IFA Magazine between 17th and 22nd March and there were 126 respondents.
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